Building a Better Credit Report

Building a Better Credit Report
Your credit report is a file about you. It is full of information on where you live, how you pay your bills and whether you have been sued, arrested or filed for bankruptcy. Creditors use this information to evaluate your applications for credit, insurance, employment or a lease. If you have a quality, credit report, it’s easier to obtain loans at lower interest rates which results in lower monthly payments. The only way to improve the status of your credit report is with a deliberate effort and a plan to repay your bills.

The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness and privacy of information in the files of the nation’s consumer reporting companies. There were recent amendments that were made to the FCRA. Those amendments expanded consumer rights and placed additional requirements on consumer reporting companies and businesses that provide information about consumers to consumer reporting companies.

You do have a right to know what is on your credit report, but you have to ask for it. The consumer reporting company must tell you everything that is on your credit report and give you a list of everyone who has requested your report within the past year or two.

There are four basic types of information that consumer reporting companies can collect and sell:

1. Identification and employment information: This includes your name, birth date, Social Security number, employer and your spouse’s name. It also
   includes your employment history, home ownership, income and a previous address.
2. Payment history: This shows you how much credit has been extended and if you have paid on time. Also, it shows if a creditor has referred your account to a collection agency.
3. Inquiries: The consumer reporting companies must keep a record of all the creditors who have asked for your credit history within the last year. They must also keep a record of individuals or businesses that have asked to see your credit history for employment purposes within the last two years.
4. Public record information: This shows events that are a matter of public record, such as bankruptcies, foreclosures or tax liens.
   There is no charge for you to see your credit report once a year from each of the consumer reporting companies, under the Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act (FACT Act).
   

There are three consumer reporting companies that use one website, one toll-free number and one mailing address for you to order your free credit report. To order, go to www.annualcreditreport.com, call 1-877-322-8228 or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print the request form from ftc.gov/credit. You can request only one free credit report from each consumer reporting company each year, but you should not contact the three consumer reporting companies individually.

The information you will need to provide to get your free credit report is your name, address, Social Security number and date of birth. If you have moved in the past two years, you may have to provide your previous address. To maintain the security of your file, they may ask for information that only you would know.

Neither the website nor the companies will contact you to get your personal information. If you do receive a call, an e-mail or a pop-up ad that looks like it’s from the website or one of the consumer reporting companies, it’s probably a scam and you should forward the e-mail to spam@uce.gov, the FTC’s database of deceptive spam.

You may be eligible to receive other free credit reports. If a company takes adverse action against you, such as denying you application for credit, insurance or employment, you may ask for your report within 60 days of receiving notice of the action. You may also be able to receive a free credit report if you are unemployed and plan to look for a job within 60 days, if you are on welfare or if your report is inaccurate because of fraud, including identity theft. Otherwise, the consumer reporting companies can charge you up to $9.50 for each copy of your credit report within a year.

To buy a copy of your credit report, contact:

A credit score is a way for creditors to find out whether to give you credit and how much to charge you for it. A credit score is a total of points from different factors. The factors are your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts. The higher your credit score, the better the chance of you getting a loan. You can get your credit score from any of the consumer reporting companies, but there is a fee.

Improving your Credit Report
To make sure your credit report is accurate, the consumer reporting company and the information provider are responsible for correcting inaccurate or incomplete information. To correct any information, you should write a letter to the consumer reporting company identifying the information that you think is inaccurate. The letter should have your complete name and address, a COPY of documents to support your position and a clear explanation of why you dispute the information and request that it should be deleted or corrected. Send your letter by certified mail with return receipt requested, so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures. If what you are disputing is inaccurate, all three consumer reporting companies will correct the information and send you a free credit report with the correct information. That credit report does not count as your free annual credit report.

When you have any negative information on your report, which is accurate, time is the only way for it to be removed. Most accurate negative information stays on your report for seven years and bankruptcies stay on for ten years. There is no time limit on: reporting information about criminal convictions; your application for a job that pays more than $75,000 a year; and applications for more than $150,000 worth of credit or life insurance.

Your credit report does not always show all of your credit accounts. If there are any creditors that you think should be listed on your report you can add them for a fee.

Dealing with Debt
If you are having trouble paying your bills or worried about losing your house or your car, there are some options you may consider. These include realistic budgeting, credit counseling, debt consolidation or bankruptcy.

If you decide to do realistic budgeting, start by writing down all your income from all sources. Then list all your expenses that you know are the same each month. Next, list your expenses that vary every month and expenses that you think might be insignificant. You want to make sure you can make ends meet on the basics like housing, food, health care, insurance and education.

You should contact your creditors as soon as possible if you are having trouble making ends meet. Explain why it is difficult for you and see if they can work out a lower payment plan. But, you should contact them before your accounts have been turned over to a debt collector. A debt collector can not call you before 8 a.m., after 9 p.m. or while you are at work if they are aware that your employer does not approve of the calls. Collectors may not harass you, lie or use unfair practices when they try to collect a debt. If you send a written request to stop further contact, they must honor it.

If you are still not able to get out of debt, you may consider credit counseling. Credit counseling agencies can help you manage your money, develop a budget and offer free educational material and workshops. They discuss your entire financial situation and help you develop a personalized plan to solve your money problems.

Debts may be classified into two categories. Secured debts are those that are tied to an asset. For example, if you have a loan on a car or you have a mortgage on your house, they are secured by your car or your house. Unsecured debts are not tied to an asset, like credit cards, medical bills, signature loans, etc. If you start falling behind on a secured debt, contact your finance company as soon as possible to work out some kind of payment plan. When you do fall behind on a secured debt the finance company can either repossess your car or foreclose on your home. If you cannot work out a plan you can contact a housing counseling agency for help.

You may be able to consolidate your debt by taking out a second mortgage or a home equity line of credit. But, if you fall behind, you could lose your home.

The last option you have is to file bankruptcy. Bankruptcy stays on your credit report for 10 years. It will make it harder to obtain credit, buy a house, get life insurance, sometimes get a job and find a place to live. There are two types of personal bankruptcy, Chapter 13 and Chapter 7. The filing fee for a Chapter 13 is $189 and for a Chapter 7 is $274. Attorney fees are additional and can vary.

A Chapter 13 is a consolidation bankruptcy. It allows you to keep your assets like a mortgaged house or a financed car. A Chapter 13 allows you to pay back your debts within 3 to 5 years. You need to stay current with your mortgage payment and your payment to the trustee or your case will get dismissed and you may lose your assets.

A Chapter 7 is a fresh start bankruptcy. It liquidates all assets that are not exempt. Exempt property may include an automobile, work-related tools, and basic household furniture. If your assets are worth too much, a trustee can decide to sell your property. You can only file a Chapter 7 once every 8 years.

Bankruptcy does not erase child support, alimony, fines like parking tickets, some taxes and student loans.

Avoiding Scams
Before turning to a business that offers help to solve your debt problems, you should investigate the business with your local consumer protection agency or the Better Business Bureau. Be alert for advertisements that offer quick fixes; Read between the lines.

The scams are usually targeting people with bad credit or no credit. You should resist following up on advance-fee loan guarantees, they may be illegal. Legitimate creditors offer extensions of credit, such as credit cards, loans and mortgages and usually do not ask for a payment in advance. These scams usually have a “900” number and don’t send anything through the U.S. Postal Service. You should not have to pay a fee to get the credit. Here are some tips to remember before you respond to ads that promise easy credit, regardless of your credit history:

• Most legitimate lenders do not guarantee that you will get a loan or a credit card before you apply, especially if you have bad credit or have filed a bankruptcy.
• It is an accepted and common practice for reputable lenders to require a payment for a credit report or appraisal and you may have to pay a processing or application fee.
• Never give out your credit card number, bank account information or Social Security number over the phone unless you are familiar with the company and know why the information is necessary.

There are also credit repair scams. Do not believe them. Only time, a good effort and a plan to repay your debts can improve your credit report.

Here are some warning signs that you should look for:

• They want a payment from you before they provide any service
• They don’t tell you your legal rights and what you can do yourself, for free
• They recommend that you do not contact a consumer reporting company directly
• They suggest that you try to invent a new credit report by applying for an Employer Identification Number to use instead of your Social Security number
• They advise you to dispute all information on your credit report or take any action that may seem illegal. If you follow illegal advice and commit fraud, you may be subject to prosecution.

Credit repair organizations, by law, must give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you sign a contract. They must also give you a written contract that spells out your rights and obligations, before you sign the contract. Credit repair companies cannot:

• Make false claims about their services
• Charge you until they have completed the promised services
• Perform any service until they have your signature on a written contract and have completed a three day waiting period, which allows you to cancel without paying any fees.

Your contract must specify:

• The total cost of the services
• A detailed description of the services to be performed
• How long it will take to achieve the results
• Any “guarantees” they offer
• The company’s name and business address

Identity Theft
An identity thief is someone who has a piece of your sensitive information like your Social Security number, date of birth, address and phone number and uses it without your knowledge to commit fraud or theft. There are many different ways for identity thieves to get your personal information. For example, they might:

• Get information from businesses or other institutions by stealing records or information while at their job, bribing an employee who has access to the records, hacking, and conning information out of employees.
• Go through your trash, the trash of businesses or public trash.
• Get your credit report by abusing their employer’s authorized access to them or by posing as someone who has a legal right to access your report.
• Steal your credit or debit card numbers by capturing the information in a data storage device. They may swipe your card to make a purchase or use the ATM.
• Steal wallets and purses containing your personal information.
• Steal mail containing statements, new checks or tax information.
• Complete a “change of address form” to send your mail to another location
• Steal personal information from your home.
• Scam information by posing as a legitimate business person or government official.

Once identity thieves have your personal information, they may:

• Go on spending sprees by using your credit or debit card numbers to buy “big-ticket” items like computers that they can easily re-sell.
  
• Open a new credit card account using your information. When they don’t pay the bill, your credit report will have a delinquent account reported.
• Change the mailing address on your credit card account. That gives the thief enough time to run up charges on your account and it may take some time before you realize there’s a problem.
• Take out auto loans in your name.
• Establish phone or wireless service in your name.
• Use counterfeit checks or debit cards to drain your bank account.
• Open a bank account in your name and write bad checks on that account.
• File bankruptcy under your name to avoid paying debts that they have incurred or to avoid eviction.
• Give your name to the police during an arrest. If they get released and don’t show up for court, an arrest warrant could be issued in your name.

Here are some ways to protect your personal information from being at risk for identity theft:

• Keep an eye on your purse or wallet and keep them in a safe place at all times.
• Do not carry your Social Security card.
• Don’t share your personal information with random people. Identity thieves are good liars and could pretend to be from banks, Internet service providers or even government agencies.
• Read your statements from the bank and credit card accounts and look for any unusual charges or suspicious activity. Report any problems to your bank and creditors right away.
• Tear or shred your charge receipts, checks and bank statements, expired credit cards and any other documents with your personal information before you put them in the trash.
  

Here are other indications of identity theft:

• Failing to receive bills or other mail signaling an address change by the identity thief.
• Receiving credit cards for which you did not apply.
• Denial of credit for no apparent reason.
• Receiving calls from debt collectors or companies about merchandise or services you didn’t buy.

There are 4 steps that you should take right away if you suspect that your personal information has been stolen.

1. Place a fraud alert on your credit reports and review your credit reports. You can contact any one of the three nationwide consumer reporting companies to place a fraud alert on your credit report and they are required to contact the other two companies to place an alert on your report too.
   

   Equifax 800-685-1111 www.equifax.com

   Experian 888-EXPERIAN (397-3742)  www.experian.com

   Trans Union 800-916-8800 www.transunion.com

2. Close the accounts that you know, or believe have been tampered with or opened fraudulently and contact the security or fraud department of each company. Follow up in writing and include COPIES of supporting documents. Send your letters by certified mail, return receipt requested and keep a file of all the documents that you send. When you open new accounts, use new Personal Identification Numbers (PINs) and passwords. Try not to use a number that can be easily available or easy to figure out.
3. File a report with your local police or the police in the community where the identity theft took place. Keep a copy of the police report or at least have the number of the report. If the police are reluctant to take your report, ask to file a “Miscellaneous Incidents” report, or try another jurisdiction, like your state police.
4. File a complaint with the Federal Trade Commission. By filing a complaint with the FTC, it will provide important information that can help law enforcement officials track down and stop identity thieves.
   

You can file a complaint online at www.consumer.gov/idtheft, call the FTC’s Identity Theft Hotline at 1-877-438-4338 or TTY 1-866-653-4261, or write to: Identity Theft Clearinghouse, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

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